Amazon Shares Down Amid India eCommerce Regulation Uncertainty

Amazon announced during an earnings call on Thursday (Jan. 31) that it was going to increase investment in the upcoming year, and expressed concern over new regulations in India that would limit its business in the country, according to a report by CNBC.

On Friday (Feb. 1), Amazon stock dropped 4 percent, after Amazon CFO Brian Olsavsky shared the investment news. Amazon had been pulling back on expenditures and hiring less in 2018.

The company, which at one point in 2018 reached the milestone of $1 trillion in market value, was valued in the neighborhood of $800 billion on Friday.

Analysts said they were worried about the types of costs associated with new Indian regulations that would hamper the company’s ability to do business. The law prevents multinational eCommerce outfits from selling products through affiliated companies.

The repercussions have affected Amazon’s outlook and might have been a factor in the company’s soft guidance for Q1 in 2019. It’s also been a factor in slow international growth for the company.

Q1 revenues are expected between $56 billion and $60 billion, which is lower than the $60.8 billion estimated by analysts.

“There is much uncertainty as to what the impact of the government rule change is going to have on the e-commerce sector there,” Olsavsky said. “Our main issue and our main concern is trying to minimize the impact to our customers and sellers in India.”

Despite the uncertainty, some analysts remain confident in the stock, while lowering price targets.

Doug Anmuth, from J.P. Morgan, lowered his target, saying, “Uncertainty in India, along w/a higher 4Q base, takes early 2019 revenue acceleration off the table… But we still expect AMZN to grow revenue 18% FXN for the year and operating income by 30%. And we want AMZN to invest into long-term growth opportunities …”

Lloyd Walmsley, from Deutsche Bank, actually raised his price target.

“We think Amazon is ultimately going to substantially expand its physical footprint and push further into healthcare and shipping/logistics, opening up its addressable markets further,” he said. “Notwithstanding the volatility in the shares, we think valuations remain compelling.”